Suzlon seeks debt recast

After defaulting on redemption of foreign currency convertible bonds (FCCB) worth $220 million dollar, wind turbine maker Suzlon Energy has sought a bailout from its Indian lenders. The Pune-based company issued a statement this evening that it had begun discussions with lenders to restructure its debt with a maturity period of 10 years. The company is also negotiating for a two-year moratorium on principal and interest payments on loans under the corporate debt restructuring (CDR) mechanism.

The company has also sought additional working capital and suspended its guidance for FY 2013. The company has estimated a revenue of Rs 27,000 crore-28,000 crore — as against Rs 21,082 crore in FY 2012 — and operating margin of 6 per cent (as against 5.5 per cent).

SBI Caps is preparing the debt recast package for the company. The company refused to share further details regarding the maturity terms of existing debt and details on working capital.

Suzlon has total debt of Rs 14,300 crore, including Rs 5,000 crore worth of dollar debt. The dollar debt comprises fully convertible currency bonds maturing in 2012 (other sets of bonds would mature in 2014 and 2016) and foreign currency term loans worth $350 million. The State Bank of India alone has a loan exposure of about Rs 3,500 crore.

Earlier this month, the company announced that its negotiations with foreign lenders to extend redemption date of $220 million worth bonds had failed. Suzlon, the world’s fifth largest wind energy turbine maker, was due to redeem bonds along with interest on October 11.

In June this year, when the company had to redeem bonds worth $360 million, it had managed to get a 45-day extension from bondholders.

At that time, a consortium of banks gave it debt to tide over the crisis, but it was not so lucky this time around.

Kirti Vagadia, chief financial officer at Suzlon, said: “The company has, in consultation with its senior secured lenders, taken the decision to undertake a debt restructuring exercise under the CDR mechanism. Our senior secured lenders are supportive of our long-term business plans, and our efforts to consolidate our overall debt to achieve a sustainable capital structure.

According to Vagadia, CDR is an important step towards stabilising business by enhancing liquidity and inject additional working capital. “We believe this will help us to safeguard the interests of our key stakeholders, including customers and vendors. Additionally, our ongoing engagement with our bondholders continues to be both constructive and progressive, and we expect that an acceptable solution for all stakeholders will be reached at the earliest possible date,'' he said.

Suzlon has posted three successive quarters of net losses and has plans to reduce costs, including cutting employment rolls by 20 per cent by the end of the year ending March 31, 2013. The company has been forced to sell assets to pare debt — it exited Hansen Transmissions International in 2011 and sold its China-based manufacturing facility in 2012 for $60 million.

The company's stock closed 2.5 per cent higher at Rs 15.85 on the BSE on Monday.